Adapting to the 'new normal'

by Keith Nunes
Share This:
Search for similar articles by keyword: [Consumers]
Jack Ringquist
Jack Ringquist, a principal with Deloitte Consulting L.L.P. and global consumer products leader for the company

NEW YORK — Many food and beverage executives have taken to calling the changes taking place in the North American market the “new normal.” The changes, many of which were outlined in a recently released report published by the Food Marketing Institute and the Grocery Manufacturers Association in conjunction with the consultancy Deloitte, found that purchasing influencers have broadened and the market has fragmented. Consumer decision making is based less on industry messaging and more on a peer network that shuns such marketing.

To succeed in the new, evolving environment companies may need to seek executives with different skillsets and who are capable of adapting to changes in the marketplace, according to one person who worked on the report.

“The (consumer packaged goods) industry is focused on the idea of efficiency and scale,” said Jack Ringquist, a principal with Deloitte Consulting L.L.P. and global consumer products leader for the company. “Complexity is what you fight against. These are really interesting challenges and one is how do you get closer to consumers and retailers? How do you engage them and how do you develop an operation that can grow in this environment?

“Now companies need to make strategic choices. If you have been around big food and beverage companies you know that is not how they think about the business. They must open up their walls and look to hire a different set of talent with different capabilities. This is not much different from what has happened in other industries.”

Mr. Ringquist said anyone looking for a parallel to what is happening in food and beverage need look no further than the automotive industry.

“The auto business had a lot of big marquee names many thought would not be around,” he said. “But they took an inward look at their operations and structure and learned; they learned to be more efficient, they took a look at quality issues and saw how they affect brands in a big way.

“But, in addition to those issues around economics and quality, the consumer has also shifted on them. There are a number of studies that show, if you look at the younger population in our country and in other developed countries, they are driving less. What auto companies are realizing is they will sell fewer cars as people are driving less.”

On Jan. 21, General Motors introduced Maven, a car-sharing service. An app-based program, Maven customers will be able to search for and reserve a vehicle by location and car type, and unlock the vehicle with their smartphone. The pricing structure is simple and transparent and includes insurance and fuel, according to the company.

“You look at that and then you look at food and you say, ‘wow, what could a big food company do other than sell food?’” Mr. Ringquist said. “What kind of ecosystem could they develop?”

Such disruptive efforts to C.P.G. are happening, but are often developed and initiated by smaller, more entrepreneurial firms.

“The (companies) that will win are those that are thinking about it now,” he said. “I feel the ones that don’t think about this and aren’t investing in new ideas and making partnerships with people developing these capabilities will continue to lose share and continue to see their market shrink. They will be selling a commodity at best and playing in a low cost game. If you are a branded C.P.G. (company) I don’t think that is what your shareholders want.”

To adapt, Mr. Ringquist said leadership must change.

“Big companies need to create a culture of being much faster in terms of getting to shelf and be more accepting of failure,” he said. “They need to be more like technology companies where the shelf life of products is much shorter; they have a big pipeline and catch failure early. They (leaders) need to promote that culture.”

The changes are taking place in some companies, Mr. Ringquist said. He has seen C.P.G. companies bring in executives from such firms as Amazon and Google. He also praised the industry’s willingness to accept new ideas. Large companies have set up venture capital programs to provide resources to entrepreneurs to develop new ideas. To grow the efforts, he said executives will need to have different skillsets.

“Some of the skills include e-commerce, digital marketing (and) consumer engagement, consumer insights (and) analytics, digital asset management, mobile app development, innovation and product portfolio management, and venture funding.

“For c.f.o.s (chief financial officers), I can see the need for stronger skills in portfolio management as they allocate investments across a more dynamic product portfolio.  This will require knowing where in their lifecycles individual brands/products are, how they are performing, and dynamically increasing or decreasing investments to obtain the best return.

“This will also require strong skills working across the organization so that marketing and sales activities adjust as needed and that production and distribution activities are in line with consumer demand.  Operations will continue to drive improvements in production efficiencies so they can manage smaller production runs in a cost effective manner and be nimble to adjust schedules to support shorter product lifecycles, more dynamic consumer demand, and more frequent and varied retailer promotions.”

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.